The conventional wisdom in government, academia and much of industry is that companies are choosing to close their costly domestic operations in favor of better prospects and profits in other countries. While it is certainly true that U.S. companies are being pulled overseas by the allure of potential profits and cheap labor, the vast majority are also being pushed overseas by something that is much more proximate to the U.S. domestic industrial structure than the desire for new markets, lower labor costs or greater efficiencies in sourcing: the United States’ dysfunctional distribution system. And, although its impact is ubiquitous, the clear connection of this force to the surge in U.S. outsourcing has gone largely unnoticed.
It is not corporate avarice that is driving a good deal of manufacturing out of the United States. Nor is it the desire for the cheapest price on the part of consumers. What is forcing thousands of companies to close U.S. operations and lay off workers is an imbalance in the sales and distribution model that has evolved over the past four decades. Distribution has been turned on its head as distributors have wrested control of the strategic prerogatives of manufacturers in order to capture a disproportionate share of the value of the supplying company’s products. The megadistributors end up profiting at the expense of their vendors, and manufacturers earn... To read the complete article, login or sign-up using the form below.
Become a premium subscriber today to read this and all MIT Sloan Managmeent Review articles.
Buy this article. Purchase one or more copies of this article in PDF form.
Become a premium subscriber today to read this article and the entire archive of MIT SMR articles.
Upgrade your existing subscription to premium
Sign in if you are a premium subscriber.
Do you subscribe the MIT Sloan Management Review in print? Enter the email address and password you used when ordering. Don't remember? Lookup your subscription account information
- Register for free access to recent articles and the current issue of MIT Sloan Management Review.
- Subscribe and read articles from the past three years online.
- Premium subscription give you access to the entire archive of articles.
